JITD program (where Barilla’s logistics would specify appropriate delivery quantities as compared to the distributors order placements)
Issues Identification According to the Barilla SpA (A) Case, “the increasing variability of Barilla’s dry pasta product (about 800 SKUs)” illustrates that Barilla is suffering a bullwhip effect which is caused by extreme demand fluctuations, high inventory carrying costs and manufacturing costs, inadequate product availability and the distributors’ inability to carry large number of SKUs. In addition, the internal and external resistance of Braila’s JITD program has been recognized the biggest obstacle of the organization. Therefore, the mistrust caused a lack of information for Barilla to forecast demand.
Environmental and Root Cause Analysis Variation in Demand caused Bullwhip effect in Barilla’s entire supply chain. The demand fluctuation is caused by excessive promotional activities and volume discount, no limit in order quantities from distributors, the long order lead times, and the lack of sophisticated forecasting techniques. The high inventory levels caused the increase of financial burdens on both Barilla and its distributors. It’s also difficult for Barilla to quickly respond to the huge fluctuation and uncertainty of demand form its distributors. Then stock-out happens all the time and Barilla’s customer order fill rate is suffering and so does the manufacturing and distribution operation cost. In order to solve these above issues, Barilla promotes its JITD program to distributors. With the vendor managed inventory concept, Barilla’s JITD program treats end customer data as the input and provide Barilla the final authority to determine shipments such as what and when to ship to distributors. Therefore, distributors need to provide POS data of different SKUs. However, for Barilla’s distributors, they fear to relinquish their control by provide what information the Barilla needs. Distributors are mistrust that the benefits would go towards Barilla while the risks will move towards themselves. Furthermore, the marked resistance within the organization was also visible as the opposition from sales and marketing department. They fear the implementation of JITD program would diminish their responsibilities. Other internal resistances of Barilla’s JITD program are considered as lack of sophisticated infrastructure to handle this program, inability to quick shipment may lead to stock-out, and skepticism about cost reduction.
Alternatives and Options There are possible alternatives to counter the Bullwhip Effect. First of all, Barilla can try to counter the resistance of Barilla’s JITD program by running an experiment at on or more of the convinced distributor site and then demonstrate the benefits of JITD program with the experiment result to other unconvinced distributors. The JITD program can be looked as a company wide effort rather than as a supply chain program. Barilla needs to get its top management closely involved. However, the problem is that it might be very hard to persuade one of the distributors sites that are willing to let Barilla to conduct an experimental running of the program. Secondly, Barilla can adopt the demand fluctuation instead of implementing the JITD program. To achieve this point Barilla need to hold buffer FGs to meet distributors’ requirements and ask the distributors and retailers to carry additional inventory. However, this method will strain manufacturing and logistics operations and poor the product delivery management. And distributors may not agree to do this because their inventory…